Apple Stock: Will Investors Be Taking a Bite After Its Q4 FY2024 Earnings?

TradingKey - Nothing has become more critical to individuals’ everyday lives than the smartphone. The main global company in that space is no other than the iPhone giant Apple Inc (NASDAQ: AAPL). The company’s ubiquitous iPhones have been the main driving force that has catapulted Apple to the top of the global market cap rankings.

Beyond that, though, Apple is also expanding beyond traditional hardware (like iPhones and iPads) and into what it calls “Services”, such as the App Store and Apple TV+. Its Services unit has grown to be a substantial part of its overall business.

Over the years, Apple shares have been an incredible investment for long-term investors. For example, just in the past five years alone, Apple’s stock has risen 265%. Yet the business is also facing its own challenges, from slowing iPhone sales in China to a lack of notable Artificial Intelligence (AI) initiatives.

Investors will have a chance to understand how this giant business is doing when Apple reports its Q4 FY2024 earnings – for the three months ending 30 September 2024 – on Thursday (31 October) after the market closes. 

Here’s what investors should watch out for and whether they may be tempted to buy Apple’s stock after it reports. 

Watch iPhone 16 shipments + Apple AI

This will be the first earnings report for Apple since it released its latest iPhone 16 series of smartphones on 20 September. While the actual reported quarter won’t have much sales data for investors to go off, there should be guidance from Apple management in terms of demand for the rest of the year and into the first quarter of 2025. 

How successful this new iPhone cycle is will be important for Apple’s fortunes given sales of the iPhone alone made up 46.5% of Apple’s US$85.77 billion in overall revenue for its most recently-released Q3 FY2024 quarter. 

The company has also released its Apple Intelligence product to all iPhone 16 models and the iPhone 15 Pro and Pro Max. Apple Intelligence is a suite of AI tools that was announced in June. Apple had said at its iPhone 16 release that its new phones were built specifically to handle AI and Apple Intelligence tools. These include tools for writing and creating new emojis as well as incorporating ChatGPT into Siri.

Whether any of this has a material impact on Apple’s sales of iPhones remains to be seen and investors will want to hear more from management regarding its iPhone 16 and AI initiatives on the earnings call.

Will China demand slow further?

One of the biggest obstacles for Apple in recent quarters has been a material slowdown in sales of iPhones in China.

In the first quarter of 2024, Apple saw its iPhone sales in China fall by 19% and in the second quarter the company fell out of the top five brands in China’s smartphone market (by shipments), according to IDC. That’s turn around somewhat in the third quarter, though, as Apple returned to the top five in the third quarter, according to IDC data.

That’s likely been driven by a 20% sales jump of Apple’s iPhone 16 series in China in the first three weeks of its release compared to the 2023 model’s sales. The data suggests the higher-end models (Pro and Pro Max) iPhones are performing well with Chinese consumers.

Finally, investors will also be keeping an eye out for how Apple’s Services division is faring as it’s the strongest revenue grower (on a percentage basis) and now makes up close to 30% of Apple’s overall revenue – as of its Q3 FY2024 quarter.

Apple shares have gained 25.7% so far in 2024 and are outperforming the S&P 500 Index, which has returned 22.8% over the same period.